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History of Missouri Bank Regulations

The first banking corporations in Missouri received their charters by special acts of the territorial legislature and, after 1820, by acts of the Missouri General Assembly permitting the incorporation of particular banks. During the pre-Civil War period, the state's financial needs were also served by a number of incorporated private banks which lacked the legal authority then possessed by state-chartered banks--that of issuing bank notes which circulated as currency. Private or unincorporated banks continued to operate in Missouri as late as the 1920s and a number of today's banking corporations began operations as private banks.

In 1857, the General Assembly enacted a statute creating state administrative offices for the supervision of state-chartered banks. The Banking Commissioner and Assistant Banking Commissioner were given four-year terms and were appointed by the Governor. The Commissioner and Assistant Commissioner had custody of the plates and dies used for the printing of each bank's notes and one of the two state officials was required to countersign each bank note issued. Periodic bank examinations were required by the act. The first person to serve as Banking Commissioner was Claiborne F. Jackson. He was elected Governor in 1860, urged Missouri to secede from the Union and was replaced by an anti-secessionist Governor during the 1861 state convention at which Missouri decided to remain in the Union.

In 1863, an act with the stated purpose of creating a national currency and which permitted state banks to become national banks was passed by the United States Congress. While a national currency was undoubtedly needed, the main underlying purpose of the act was to better finance the Union's Civil War effort. National banks were permitted to issue bank notes up to an amount equal to ninety percent of the market value of U.S. Government bonds deposited with the U.S. Treasury. Thus, national banks were forced to buy bonds to finance the staggering cost of the Civil War. In 1865, Congress imposed a ten percent tax upon the payment after July 1, 1866, of any bank note other than national bank notes. As a result of this statute, most of the bank note issuing state-chartered Missouri banks became national banks and, in 1866, the posts of Banking Commissioner and Assistant Banking Commissioner were eliminated.

Missouri's first general incorporation act for banks was adopted in 1877. No prior submission to or approval by any organ of the state was required by the act. The first comprehensive trust company statute was adopted in 1885. In 1895, an act was passed requiring annual bank examinations and the Secretary of State was given administrative powers to enforce compliance with the banking statutes.

In 1907, the General Assembly revised the banking statutes and created the State Banking Department headed by the Bank Commissioner. This action took effect in 1909.

In 1921, the State Banking Department became the Department of Finance and the title "Commissioner of Finance" was created. The 1945 Constitution, which took effect July 1, 1946, changed the name of the Department of Finance to the Division of Finance and placed it under the jurisdiction of the Department of Business and Administration. The State Banking Board was created in 1955 to handle appeals from certain decisions and orders of the Commissioner of Finance.

Under the Reorganization Act of 1974, the Department of Business and Administration was abolished and the Division of Finance was transferred to the new Department of Consumer Affairs, Regulation and Licensing which, by Constitutional amendment adopted on August 7, 1984, was renamed the Department of Economic Development. Per Executive Order 06-04 the Division of Finance and the State Banking Board were transferred from the Department of Economic Development to the Department of Insurance, Financial Institutions and Professional Registration (formerly Department of Insurance). The transfer was effective August 28, 2006.

The director of the Division of Finance, by tradition referred to as the Commissioner of Finance, is nominated by the Director of the Department of Insurance, Financial Institutions, and Professional Registration and appointed by the Governor with the advice and consent of the Senate.

Missouri was, until recently, a unit bank state with restrictions on the location and number of branches. The restrictions were gradually removed during the 1970s and 1980s. Finally, a federal court ruled that national banks in Missouri were no longer subject to Missouri's branching limits. Immediately, state banks were given parity, first by emergency regulation and then by law, and all restrictions as to location and number were eliminated.

Missouri has also adopted a regional reciprocal interstate banking law allowing banking organizations in surrounding states to acquire Missouri banks.

The "State Division of Finance" was created by Chapter 361 RSMo. Pursuant to that Chapter and Chapter 362 the Division is required to examine all state-chartered banks and trust companies annually to determine each institution's solvency, safety of operations and adherence to applicable state laws and regulations. The overall goal of the Division is to ensure a sound banking system for Missouri.

Protection of depositors is the fundamental concern which motivates the actions of the Division of Finance. Missouri laws contain numerous references to this strong public policy. It underlies the enforcement and removal actions authorized in Section 361.260, et seq. It is found in the law governing priorities in liquidation (Section 361.190) and it is reflected in the statutes prohibiting a bank from receiving deposits when it is either insolvent or in failing circumstances (Section 362.345). Accordingly, it is the policy of the Division to make every effort to assure that no losses are suffered by state bank depositors.

The Division of Finance is self-supporting through statutory assessments and fees based on the total assets of the institutions under its supervision. Prior to August 28, 1991 all such receipts were deposited into the General Revenue Fund. Effective that date, House Bill 516 passed by the 86th General Assembly, created a special fund, known as the Division of Finance Fund, which is devoted solely to the payment of expenditures incurred by the Division for the regulation of banks, trust companies and other corporations subject to its jurisdiction.